SMM, February 10:
The operating rate of secondary copper rod reached 26.8% in January, exceeding the expected 23.53%. With copper prices rebounding from a low of 72,780 yuan/mt to 76,450 yuan/mt in January, suppliers of secondary copper raw materials were significantly motivated to sell. Many secondary copper rod enterprises reported that the market circulation of secondary copper raw materials was noticeably higher than the same period in previous years. As the price difference between primary metal and scrap widened to 2,793 yuan/mt, the price difference between primary and secondary copper rods climbed to 1,100 yuan/mt, even reaching a peak of 1,680 yuan/mt. This rapidly ignited the stockpiling interest of terminal wire and cable enterprises and the enthusiasm of traders for arbitrage between spot and futures markets.
Before mid-January, secondary copper rod enterprises did not make significant purchases of secondary copper raw materials or secondary copper rod inventories due to weak downstream demand before the Chinese New Year holiday. However, starting from the third week of January, orders from traders and terminal wire and cable enterprises increased, prompting secondary copper rod enterprises to actively procure secondary copper raw materials in the market. As a result, raw material inventories in January reached 22,400 mt, an increase of 6,100 mt from 16,300 mt in the previous month. Due to strong downstream ordering enthusiasm, many orders had to be delivered after the holiday as logistics services were suspended. Finished product inventories of secondary copper rods in January reached 25,800 mt, an increase of 13,300 mt from 12,500 mt in the previous month. Regarding the implementation of "reverse invoicing," secondary copper rod enterprises stated that since suppliers had not fully accepted the "reverse invoicing" procurement model, some purchases in January still followed the old model. However, considering that the old model might not continue after the holiday, some taxable secondary copper raw materials were purchased in January as a precaution. This indicates that the rapid rise in copper prices stimulated pre-holiday stockpiling enthusiasm among downstream enterprises, leading to a significantly higher-than-expected operating rate of secondary copper rods in January.
The raw material inventory of secondary copper rod enterprises in January was 22,400 mt.
Suppliers of secondary copper raw materials actively sold at high prices in January. On one hand, the rapid rise in copper prices encouraged suppliers to sell more before the Chinese New Year holiday to accelerate cash flow. On the other hand, as "reverse invoicing" was gradually implemented across regions, although some secondary copper rod enterprises were still willing to purchase under the old model, it was uncertain whether they would only consider taxable secondary copper raw materials or adopt the "reverse invoicing" model after the holiday. These two factors prompted many secondary copper raw material yards to actively sell. According to discussions, many secondary copper raw material yards had varying degrees of inventory reduction compared to the same period in previous years. It is expected that after the holiday, suppliers will be cautious in purchasing to prevent price fluctuations caused by policy implementation.
The operating rate of secondary copper rods is expected to reach 31.7% in February 2025.
According to feedback from secondary copper rod enterprises, post-holiday resumption of work is roughly divided between February 5 and February 13. Therefore, the recovery of operating rates for secondary copper rod enterprises in February is expected to take time. Additionally, the average shipment volume of secondary copper rod enterprises after the holiday is around 1,000-2,000 mt, which basically meets the post-holiday restocking needs of terminal wire and cable enterprises. As a result, the rebound in the operating rate of secondary copper rods will be limited.
